The Financial Markets Authority - Te Mana Tātai Hokohoko - has published guidance on how providers of client money or property services, and custodians, can meet their obligations under the Financial Markets Conduct Act 2013 (FMC Act).
It replaces the FMA's 2014 guidance note for brokers and information sheet on custodians' obligations to align with the new regulatory regime. It also provides additional guidance for custodians who have specific obligations in addition to those that apply to all client money and property service providers.
The guidance addresses previous issues the FMA observed through monitoring visits and misconduct cases and was finalised following consultation with providers and custodians in 2022. The FMA thanks the eight submitters who provided their observations and insights.
A 'provider' under the FMC Act is a financial service provider who holds, transfers, or deals with client money or property on behalf of clients. It replaces the 'broker' role under the old Financial Advisers Act 2008.
A 'custodian' is a provider who holds money or property for clients, rather than someone who just executes orders to pay or transfer money or property to another person. Custodians have additional obligations related to audit and assurance engagements, reporting to clients, and reconciliations.
Key takeaways
- Sets out the FMA's view of how custody reporting should be provided to clients - namely that it should be provided directly to a client via an address of their choosing, rather than to a financial adviser or other person involved in the transactional chain.
- Sets out the FMA's view that where reporting is provided via an electronic platform, the platform should be the custodian's own, or else have appropriate systems and controls in place to ensure the reports and information cannot be altered by the platform provider or anyone else involved in the transactional chain.
- Suggests steps providers and custodians can take to verify client's electronic addresses.
- Confirms that client money and property rules do not apply to a 'broker' within the meaning of the Insurance Intermediaries Act 1994, and that in the FMA's view a non-IAA broker is not providing a client money or property service.
Download the Guide for providers of client money or property services
